Is Beyond Meat's stock price beyond reason?

• Beyond Meat shares have soared more than 600% since the company went public in May.
• Short sellers have lost nearly $600 million betting against the stock.
• But J.P Morgan Chase analysts on Tuesday downgraded Beyond Meat shares, which tumbled nearly 25% to $126 per share, erasing gains from Friday and Monday.  

Investors and analysts are scratching their heads as shares in alternative meat company Beyond Meat continue to cook up a storm. Its stock price jumped another 21% to $168 per share in Monday trading. 

That means the El Segundo, California-based company's stock has soared more than 600% in just over one month since its public debut, giving it a nearly $10 billion valuation and leading critics to liken the stock rally to a bubble. Short sellers betting on a share price crash have already lost nearly $600 million betting against the company, making Beyond Meat the least profitable short in the packaged food and meat sector this year, according to research firm S3 Partners.

"If shorts don't begin covering their positions soon, we can assume that [Beyond Meat] is becoming Tesla-esque where being a long shareholder is more than an investing decision but also a lifestyle decision, while being a short seller is a more of a test of conviction and principle," Ihor Dusaniwsky said Monday in a research note.

J.P. Morgan industry analysts on Tuesday downgraded Beyond Meat's stock to "neutral," saying the company's revenue and profit potential are fully priced into shares. Beyond Meat stock tumbled about 25% to about $126 per share after the report, erasing gains since Thursday's earnings report.

Critics say the company's stock market market value, which is larger than Shake Shack's and Wendy's combined, isn't justified given that the money-losing company generated just $40 million in revenue in its first quarter. 

Yet the high trading volume suggests investors are treating the stock rally as a short-term opportunity. Nearly 25 million shares traded hands Monday, the most since the company's May 2 initial stock offering.

"They're looking at the spreads," said Howard Silverblatt, senior industry analyst at S&P Dow Jones. "They go in, they make money and they walk out."

Beyond Meat isn't the only company targeting the burgeoning consumer market for meat substitutes. California rival Impossible Foods also offers a soy-based burger and is rolling out in Burger King locations nationwide. But Beyond Meat is the first one to go public, generating more than its fair share of investor excitement. 

"There's competition, yes, but this is the one around right now," Silverblatt said.

Investor excitement can vanish quickly, of course. Another stock that garnered attention recently was cannabis company Tilray. It climbed to over $200 per share in September but now trades around $43. 

"It's a good example of how hype can carry a stock to such great heights, ultimately to be disappointed," said Douglas Boneparth, president of Bone Fide Wealth.

However, stock performance varies widely from case to case, and it's unclear when or if the Beyond Meat rally will end: "If there's anything I've learned," said Boneparth, "it's that nobody can really predict what's going to happen."  

In:
• Beyond Meat